Lithuania issues snap tender terms for LNG suppliers

By bne IntelliNews October 24, 2012

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Set for a new government with a less confrontational stance towards Russia and its dominance of energy supplies, Lithuania is racing ahead with plans to diversify its sources of gas, announcing on October 23 a snap tender for suppliers to its planned liquefied natural gas (LNG) terminal.

State-controlled oil terminal Klaipedos Nafta called the tender to supply LNG to the floating regasification and storage unit that Lithuania agreed to lease from Norway's Hoegh LNG starting in 2014. The company set a deadline of October 29 at 15:00 GMT for proposals from suppliers, and expects to sign a contract by the end of the year, its chief executive said, according to Reuters.

The contract for the platform was signed early this year, as part of an accelerated drive from the government to ease the country's reliance on Russian energy. The Baltic region's history inside the Soviet Union has left Lithuania, Estonia and Latvia outside European networks, meaning that Gazprom currently supplies 100% of the gas consumed in the three countries.

Vilnius has been pushing hard to break that grip, hoping that access to spot markets will offer it increased leverage with Moscow over pricing. The same day that the supply tender was issued, it was announced that the proposed site of the platform and associated onshore infrastructure at Klaipeda Seaport has been granted the green light. "All state institutions (14 in total) involved in the environmental impact assessment (EIA) process approved the report on the EIA, which shows that the project is viable and essential to Lithuania in order to ensure energy independence," said Rolandas Zukas, Klaipedos Nafta's director for the project, according to Leta.

Lithuania's current centre-right government slumped into third place in parliamentary elections recently, as expected, with the Social Democrats the most likely to lead the next governing coalition. That party has pledged a far less-confrontational approach with Russia. Attached to the first round of voting in the election was a non-binding referendum on the incumbent government plan to build a regional nuclear power station, which again is planned to reduce dependence on Russia.

Klaipedos Nafta, majority-state owned, which is in charge of also developing the LNG terminal, said in a statement it wanted to sign a contract for importing 0.75bn cubic meters (cm) of gas per year through the planned terminal, with a contract "preferably" for 10 years. Lithuania imported 3.4bn cm of gas in 2011. "We would like to sign the supply contract as soon as possible, but we don't know how negotiations would go," CEO Rokas Masiulis told Reuters. "We want the contract to be signed by the end of this year."

Lithuanian officials have spent the year visiting the likes of Qatar and Norway discussing potential supply, but still the week-long deadline suggests the outgoing government wants to push through a contract before it leaves office. Klaipedos Nafta says it wants to see the first LNG delivered to the Lithuania terminal in January 2015.

The company signed a memorandum of understanding with Houston-based Cheniere Energy on possible LNG deliveries in 2011. Chenier said last month it was likely to start selling spot LNG from its Sabine Pass project in Louisiana as early as late 2015. However, Masiulis declined to comment whether Cheniere is still considered to be a potential supplier.

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